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Asian Shares Broadly Lower

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November 24, 2016

Asian markets were broadly lower Thursday, in response to strong economic data out of the U.S. overnight that pointed to rate increases, continued strength for the dollar and more capital flight from Asia.

Durable goods orders in the U.S. rose 4.8% in October from a month earlier, well above the 2.7% gain predicted by economists surveyed by The Wall Street Journal. In addition, a measure of U.S. consumer sentiment rose in November, signaling rising confidence in the economy.

On the plus side, however, the data pointed to improved U.S. demand for goods and commodities from the Asia-Pacific region.

"I was very surprised to see strong European PMIs [purchasing managers indexes] and very strong U.S. data as well?it's boding well for risk appetite," said Christoffer Moltke-Leth, director of global sales trading at Saxo Capital Markets.

But more significantly, the data also raised worries about emerging economies in the region.

"There are concerns about emerging markets," said Mr. Moltke-Leth, pointing to Malaysia, Indonesia and the Philippines.

Minutes from the U.S. Federal Reserve's November meeting indicated officials believe a rate increase could become appropriate "relatively soon" if data continued to show an improving economy. This has given the U.S. dollar strength against most currencies in Asia.

The Korean won fell 0.2% against the dollar Thursday, the Indonesian rupiah was off 0.4%, the Japanese yen slipped 0.1% and the Malaysian ringgit was 0.4% lower.

Japanese stocks benefited from the weaker yen, which boosts the competitiveness of the country's exporters.

A weaker yen is expected to continue being "very favorable" for equities, said Hisao Matsuura, chief strategist at Nomura. As a result, earnings revisions are expected as early as next quarter from exporters such as car companies. "How much they recover will show how much things have improved," Mr. Matsuura said.

China's central bank fixed the yuan 0.26% weaker against the U.S. dollar Thursday. It has guided the currency weaker for most of this month, as the U.S. dollar has experienced a broad-based rally.

"The [yuan] depreciation will be more negative to Chinese companies that have offshore [listings]," said Alexander Lee, research director at DBS Vickers. "These tend to be China properties, airlines and some of the environmental companies."

Singapore stocks also fell after the city-state narrowed its growth forecast for this year. The FTSE Straits Times Index was down 0.2%.

Jingyi Pan, market strategist at IG, said the manufacturing and construction sectors were growing slower, on a year-over-year basis, while the services sector saw no growth.

"The wholesale trade and finance and insurance sectors could continue to face external headwinds," Singapore's Ministry of Trade and Industry said.

Among major Singapore stocks, DBS Group Holdings was down 0.4% and United Overseas Bank was 1% lower.